Wal-Mart: Adding Fuel to the Underemployment Crisis

Wal-Mart is the single largest private employer in the country. It employs 2.2 million employees, including an estimated 1.3 million hourly workers.

To get a bit of perspective on those numbers, consider this: Wal-Mart has double the number of employees as the United States Postal Service and a global computer network larger than that of the Pentagon. 100 million U.S. shoppers visit a Wal-Mart each week, and Americans spend about $36 million per hour at Wal-Mart stores. If Wal-Mart were a country, its economy would be the 25th largest in the world.

National Underemployment Crisis

Wal-Mart is notorious for its practice of intentional underemployment. Underemployment refers to an employee who would like to work full-time (40 hours a week) but receives less than 40 work hours each week. In many cases, this not only substantially decreases an employee’s take-home earnings, but it renders the employee ineligible for benefits. 40 percent of Wal-Mart’s workforce is underemployed.

“There is a ‘new normal’ in the labor market, where many low-wage workers are still getting too few hours and too few opportunities for advancement into good-paying full-time jobs,” explained Scott Allard, a professor at the Daniel J. Evans School of Public Affairs at the University of Washington. While the so-called underemployment crisis might seem like a problem of individual employees, it has economic implications for the entire country. It depresses wages across economic sectors, increases dependence on public assistance programs, and decreases access to adequate health care. Underemployment is currently a national crisis, and Wal-Mart is only adding fuel to the fire.

Low Wages that Force Employees to Seek Public Assistance

Individuals who are underemployed are more than six times more likely to live in poverty than those who are employed full-time, full-year. What is even more concerning is the fact that the poverty rate for the underemployed is rapidly rising.

According to the U.S. Census Bureau’s annual report on income and poverty, released in September, the poverty rate for the underemployed rose from 16.6 percent in 2012 to 17.5 percent in 2013 in spite of the fact that overall poverty rates in the country have dropped for the first time since 2006.

Not only is this a concerning trend, it is a national problem. When underemployed employees can’t meet their basic economic necessities (food and housing), they inevitably turn to public assistance programs. Wal-Mart employees alone receive a total of $2.66 billion in government assistance annually, including roughly $1 billion in health care assistance. That works out to be a subsidy of $5,815 per worker.

The bottom line? The cost of underemployment isn’t borne by Wal-Mart; it is being borne by the American taxpayers, which essentially amounts to one giant corporate subsidy.

Inadequate Healthcare Coverage

Wal-Mart once allowed eligible part-time employees to purchase health care. In 2011, however, Wal-Mart cut all health care coverage for employees who worked less than 24 hours a week, and in 2012 it cut coverage for employees working less than 30 hours a week.

Originally, those part-time workers who were already eligible for health care prior to the cuts were grandfathered into the health care programs. However, in October the company announced it would be cutting health care benefits to anyone grandfathered into the program as of Jan. 1. Furthermore, the company announced that it will be raising premiums in 2015, to the tune of 20 percent.

Continued Depression of Labor Costs Across Economic Sectors

The problem goes well beyond just Wal-Mart employees. Because of the sheer scope of Wal-Mart, it exerts a considerable amount of influences across a variety of sectors. “Its business model has long relied upon strictly controlled labor costs: low wages, inconsiderable benefits, and aggressive avoidance of collective bargaining with its employees,” explained a 2014 report issued by Congress.

“As the largest private-sector employer in the U.S., Wal-Mart’s business model exerts considerable downward pressure on wages throughout the retail sector and the broader economy. This model has multiplied across the sector. While employers like Wal-Mart seek to reap significant profits through the depression of labor costs, the social costs of this low-wage strategy are externalized.”

Opposition to Labor Unions

Because of Wal-Mart’s staunch anti-union stance, employees lack the collective bargaining power to push for higher wages or better benefits. According to reports, Wal-Mart penalized workers for going on strike by illegally punishing them and cutting their working hours.

Earlier this month, a National Relations Board judge ruled that Wal-Mart had violated federal law by intimidating employees who sought to join or back labor unions. Ultimately, by unlawfully mitigating organization efforts, Wal-Mart makes it all the more difficult for its employees to demand better wages, benefits, and working conditions.